Architecture & Organization

An architect's day one job is to know the organization

Each organization is different in its operating model, organization structure, and strategic needs. It’s critical for an architect to understand the current and aspirational state of the organization to be able to make better decisions. In this blog, we will explore some tools that can help architects better understand an organization’s IT needs. Let’s start with a model to explore the relationship between the operating model and IT expectations.

Operating Model and IT Expectations

The book “Enterprise architecture as a strategy” gives us a simple two-by-two matrix to understand how an organization’s operating model impacts the IT strategy. I have modified the matrix a bit to help us understand it better from the modern context. The two dimensions of the matrix are

Business Process Integration: This a measure of how much each business unit in the organization is dependent on each other.

Business Process Standardization: This a measure of how much each business unit in an organization is similar in its process.

Don’t worry if you can not understand. The concept of business process standardization and integration will be simple when looking at each matrix quadrant.

Type: Replication

With these organizations, each business unit does similar operations with centrally evolved business process standards. Restaurants, hotels, and supermarket chains are some of the best-suited industries for this type of operating model. Customers, transactions, and data remain local to each business unit. For example, each restaurant has to manage its order, queue, inventory, etc.

• Central IT teams have to build standard infrastructure and applications to deploy across the edge to enable process enforcement and efficient operations.
• Local business transactions and data management. For example, each restaurant unit must map its order based on local inventory.
• There can be centralized applications and data for functions like analytics, reporting, or supply chain.
• IT investment and decisions are driven centrally.
• Should support hypothesis-driven change in process standards and technology with experimentation at few edges.
• IT operations resemble a technology product company building a product and deploying it across multiple vendors.

“Chick-fil-A” a restaurant chain has built a similar standard infrastructure and applications at the edge with 1000’s Kubernetes clusters. Know more at: https://www.infoq.com/presentations/chick-fil-a-k8-clusters/.

Type: Unification

With these organizations, each business unit does similar operations with centrally evolved business process standards. Customers, transactions, and data remain central and shared with each business unit. Geographically distributed manpower-intensive business models are the best suited for this type of operating model. For example, NetworkRail (Britain’s Railway) segmented its operations with region-based business units.

• Central IT teams have to build applications and data shared by different business units.
• The business transaction remains centralized, and the data availability has to be democratized across business units.
• IT investment and decisions are driven centrally.
• Should support hypothesis-driven process and technology changes.
• Standard Interface for business unit level minimal customization as allowed by the process standards.
• IT operations resemble a Return On Investment based model, operating outside the major business units connected to the central leadership.

Type: Coordination

With this operating model, each business unit does a sliced specialized function of an organization. Each business unit is agile and can follow different business process standards. They have a well-defined dependency between each other with share customers, transactions, and data. For example, an airline will have its e-commerce/sale, flight operations, catering, and engineering (aircraft maintenance) as separate business units to efficiently manage functions that require unique capability.

• With this model, IT is an integral part of the business unit. IT and business units together form multiple product teams.
• Hypothesis-driven product development, agility, and speed of execution are the key to these business units.
• The business transaction and data remain distributed. A well-defined interrelationship between the product’s bounded contexts is required.
• A standard interface for integration between business units for efficient coordination is required.
• With this model, IT is no more a cost center but a strategic enabler.

With more and more people connected digitally, most of the new business models are digitally powered. Hence, organizations are going through digital transformation to move towards this operating model to make IT a strategic enabler.

Type: Diversification

In this operating model, Each business unit is independent and performs a uniques line of business. They are generally different businesses under a single group of companies or a single group with similar businesses under multiple brands. They have no or very few shared customers. “GE” is one such example where we have many lines of business under a single group (https://www.investopedia.com/articles/markets/041716/top-5-companies-owned-general-electric-ge.asp). Another example is “Volkswagen Group” where all the sub-brands address different customer segments of the same road transport vehicle business (https://www.volkswagenag.com/en/brands-and-models.html).

• A central IT unit can run ROI-based initiatives. For example, with “Volkswagen Group” many cars under the brand Skoda and Volkswagen share the same platform. This could potentially open up some reuse of manufacturing and supply chain solutions.
• The Central IT unit can also provide solutions for group-wide cross-cutting concerns like employee management, HR function, etc.,
• Each line of business must remain agile and follow its operating model.

Many organizations may have multiple operating models embedded within, or trying to move away from one model to another. I have personally seen an organization migrating from replication model to unification during the COVID pandemic. It’s important as an architect to notice these nuances and work according to the context.

Strategic Importance of IT

It’s also important to look at the strategic importance of IT within the organization. The below model will show what it means to IT and architecture when IT's strategic importance is high and low.

To identify the strategic importance of an organization's IT and digital maturity, “Gregor Hohpe” has provided a model based on the CIO reporting structure in the organization (https://www.youtube.com/watch?v=Zq2VcRZmz78&t=1100s). For example, if an organization has Chief Information Officer reporting to Chief Operating Officer, it generally tends to look at IT from a Return On Investment point of view. This table will give only the current state of IT. As many organizations are going through digital/business transformation, they are generally moving from left to right to make IT a strategic enabler. By going through the organization’s mission, vision, goals, objectives, leadership communications, and IT spend segmentation we could infer the organization's direction.

The operating model, the strategic importance of the IT, and the direction in which the organization is moving will become a solid base for building Architecture Principles, Governance Models, and Solutions. That will be another topic to discuss. I will cover that in an upcoming article 🏄.